The Commonwealth Bank is making so much profit that it might be able to spare you a percentile or two. AFP PHOTO / Torsten BLACKWOOD Source: AFP

THE Commonwealth Bank has revealed it may slash lending rates even without the Reserve Bank moving, as it gallops towards the biggest bank profit in Australian history.

CBA boss Ian Narev yesterday said there was no reason for Australians to hate the bank, but he understood that many homeowners struggling with rising bills would regard as "excessive" the business' half-year cash profit of $3.78 billion.

This represents a profit of $20.7 million a day, $865,384 an hour or more than $14,000 a minute.

He admitted yesterday for the first time that the competitive nature of the Australian mortgage market, combined with falling funding costs, meant it was "conceivable' the big banks may cut lending rates even if the RBA keeps official rates on hold.

But banking analysts said that while out-of-cycle moves on standard variable mortgage rates were a "real possibility" it wouldn't happen for six to nine months at the earliest as the banks' cost of funds remain too high at the moment - even after the recent fall in pricing on global wholesale markets.

After announcing the super-charged interim result boosted by strong deposit growth and an improving economic backdrop, Mr Narev said it was legitimate for home owners and depositors to question the debate around mortgage rates and that it wasn't likely to go away anytime soon.

"Our job, unfortunately, is we've got to keep focused on the right balance between mortgage customers needs, deposit holders needs and the needs of 800,000 Australians who own the shares directly and millions more through funds and realise at any given time one or more of those group of stakeholders are going to hate us," he said.

"But it is impossible to please all those people at one-time and achieving the right balance is very hard."

The improving global outlook has seen most of the major banks lower their fixed rates in recent weeks a bid to attract borrowers.

ANZ yesterday lowered their 1-year fixed rate to 5.19 per cent and 2-year rate to 4.99 per cent.

And National Australia Bank quickly followed suit dropping their 1-year fixed rate to 5.09 per cent - the lowest level among the Big Four in the market place - and the 2-year rate to 4.99 per cent.

Morningstar banking analyst David Ellis said it was a "cracker result" that put CBA easily on track to record a full-year monster profit of $7.55 billion.

But he warned that any potential out of cycle SVR moves wouldn't occur in the near term.

"There was a tick against almost all parts of the business," Mr Ellis said.

"But before we get an out-of-cycle lending rate cut we will need to see a fall in deposit rates and a drop in funding costs which is unlikely to occur until at least the second-half of this year or the start of 2014."

Investors buoyed by the strong bank result and increase in the dividend payments pushed CBA share price to an all-time high helping the benchmark ASX 200 index above the key 5000 point threshold.

The stock market yesterday reached 5013 points - its highest level since September 2008 - having risen 25 per cent since June last year.

The outlook was also boosted by growing signs consumer sentiment is turning with the most recent survey showing the biggest jump in household sentiment since September 2011.

Mr Narev was upbeat the recent run of RBA rate cuts was starting to work and that confidence in the economy was on the rise.

"If the current stability continues, we believe it will translate into a slow but steady rebuilding of consumer and business confidence in Australia," he said.

"But of course risks remain in the economy, and as a major financial institution we must remain cautious."

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Comments on this story

adio of Brisbane Posted at 9:42 AM February 15, 2013

So they continue to make record profits but borrowing costs for them are still too high? Here's a hint: if you're making record profits that get bigger and bigger each time, the borrowing costs aren't too high! Why should they wait for those costs to come down further to deign to provide a cut to consumers? They ripped us off with increases above the rate of the RBA and decreases below it and continue to do so. This is just gouging.

N of Bne Posted at 5:29 PM February 14, 2013

Agree Sharker, I feel nauseated too. It is enough to make you sick. Although P does have a point - it all goes back to the shareholders. Makes me wish I'd bought more CBA shares...

Realist of Qld. Posted at 4:53 PM February 14, 2013

Stop classing all banks as the same.....Heritage Bank is a mutual that set a record profit of only $31,000,000.00. To put it in perspective that is 1/118th of the profits made by the big 4 & is equivalent to their CEO's complete salary packages for a year.
Heritage has consistently low interest rates and all profits go back to their member's......unlike publicly listed companies which only pay a divadend.(P of Melbourne)

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